Oil and gas explorer MEO Australia says it has received strong interest from prospective customers for methanol from its Timor Sea project.

The company on Thursday said it had received formal expressions of interest from major industry participants keen to buy methanol from its Tassie Shoal project.

"The strong expressions of interest received from highly credible customers are extremely encouraging," chief executive Jurgen Hendrich said in a statement.

The company reported that current indicated demand from its potential customers would enable 100 per cent of the output of the Tassie Shoal Methanol Plant to be pre-sold.

MEO shares were up 3.5 cents, or 11.48 per cent, at 34 cents.

Methanol is a primary feedstock for the chemical industry but there is a forecast for rapid growth in demand for its use as a fuel replacement.

And while carbon dioxide needs to be stripped out of natural gas to produce liquefied natural gas (LNG), it can be retained in the production of methanol.

MEO says it is searching for ways to commercialise its Tassie Shoal acreage that also includes an undeveloped LNG project.

A joint venture agreement to develop the methanol project with US-based specialty gases provider Air Products was terminated in December, handing back full ownership to MEO.

"Since the termination of the Air Products joint development agreement in December 2011, we have moved aggressively to re-establish ourselves in the wider methanol and LNG markets," Mr Hendrich said in the statement.